2013 (4) TMI 229 - AT - Income Tax

Unexplained cash credit received from American Mannequin Co. - CIT(A) deleted the addition - Held that - Nature and source of funds have been explained to the AO with documentary evidences, which have not been fully appreciated by the AO to arrive at a logical conclusion. Nothing on record to suggest that the impugned transaction of shares are sham or bogus and/or simple paper transactions, and amount to hawala transaction, therefore, the findings of the CIT(A) cannot be said to be erroneous and perverse. The case laws cited by the learned DR are of no help, as they revolve around issues of identity and credit worthiness of the parties, which are not the issue in the present case. In this view of the matter no reason to interfere in the order of the CIT(A) on this issue, which is upheld - against revenue. Disallowance made by the A. O. under section 43B - deduction on account of interest payment disallowed - CIT(A) deleted the addition - Held that - On perusal of the Annexure and ledger account as on 31-03-2002 it reveals that the assessee had paid the accrued interest on its borrowings from GIIC which is a State Industrial Investment Corporation before the date of filing of its return of income which the learned AO failed to appreciate and by wrongly invoking the provision of section 43B made the additions. The CIT(A) on proper appreciation of the facts of the case as well as the provisions of section 43B had directed the AO to delete the addition so made by the AO. No justification to interfere with the findings of the CIT(A). In favour of assessee.

Summary

Issues involved:
- Appeal by revenue against order of CIT(A) for assessment year 2001-02 under IT Act.
- Deletion of addition of Rs.46,20,541 under section 68 for unexplained cash credit.
- Deletion of disallowance of Rs.29,54,941 under section 43B for expenses.

Analysis:
Issue 1: Deletion of addition of Rs.46,20,541 under section 68 for unexplained cash credit
- The revenue contested deletion of the addition of Rs.46,20,541 made by the AO under section 68 of the Act, related to unexplained cash credit from American Mannequin Co.
- The AO found the transaction not genuine due to various reasons, including lack of correspondence before remittance, non-compliance with share issue procedures, and absence of required documentation.
- The CIT(A) directed the AO to delete the addition, citing a similar decision by ITAT Ahmedabad "B" Bench in favor of the assessee for a different assessment year.
- The Tribunal upheld the CIT(A)'s decision based on established ingredients for claiming relief under section 68, including proper documentation, fund routing through banking channels, and compliance with laws.

Issue 2: Deletion of disallowance of Rs.29,54,941 under section 43B for expenses
- The AO disallowed Rs.29,54,941 under section 43B for interest payments made after the end of the financial year 2000-01, which he believed should have been claimed in the subsequent assessment year.
- The CIT(A) directed the AO to delete this addition, noting that the interest payments were made before the due date of filing the return of income, thus complying with section 43B.
- The Tribunal supported the CIT(A)'s decision, emphasizing that the appellant paid the accrued interest before the return filing deadline, rendering the disallowance unjustified under section 43B.
- The Tribunal upheld the CIT(A)'s ruling and dismissed the revenue's appeal, concluding that the AO's addition was unwarranted.

In conclusion, the Tribunal dismissed the revenue's appeal against the CIT(A)'s order, upholding the deletion of both the addition related to unexplained cash credit and the disallowance of expenses under sections 68 and 43B, respectively.